income support in a time of low unemployment peter davidson, senior policy officer acoss economic...
TRANSCRIPT
Income support in a time of low unemployment
Peter Davidson, Senior Policy Officer ACOSSEconomic and social outlook conference,
University of Melbourne 30 July 2011
Australian Council of Social Service
Who’s doing it tough?
• Is Australia a lucky country that doesn’t know its luck?
• Or are some people down on their luck?
• Benefits of the boom have been distributed unevenly
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Who’s doing it tough?
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Unemployment payments were last increased in 1993, when……
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Who’s doing it tough on income support?
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Reliance on income support has been falling
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But those remaining are more disadvantaged in the labour market
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The profile of unemployment payments has changed
0%
10%
20%
30%
40%
50%
60%
1990 1995 1999 2003 2008
% of NSA-YA recipients unemployed long-term
LTU
VLTU
Over 5 years
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The profile of unemployment payments has changed
• Most Newstart Allowees are long-term recipients• One in six can only work part time due to a disability• One in three is 45 years old or over• Two thirds of long term recipients have less than Year 12
qualifications• One in 10 NSA recipients is of Indigenous background• Almost in fifteen is a sole parent
• Due to lower unemployment and Welfare to Work policies, the profile of the NSA population looks more like pensioners once did
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But the payment structure remains the same1. Pensions for those ‘unable to work’• Higher rates• No activity requirements, less employment assistance• Assumes long term need for income support
2. Allowances for those ‘able to work’ • Lower payments• Activity requirements and more employment assistance• Assumes short term need for income support
3. Student payments (18-64 years)• Lower again• Assumes parental support
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Present payment structure
employment/study
Basic eligibility conditions(age, residency, etc)
General supplements
Pension only supplements
Basic eligibility conditions(age, residency, etc)
Activity requirements(none, or less stringent)
Base rates& income tests (higher)
Pensions
Activity requirements(more stringent)
Base rates & income tests(lower)
General supplements
Allowances
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Falling over the edge:how the system makes transitions difficult
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Real value of pension and allowance payments for a
single adult (in 2008 dollars)
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Problems with present systemUnfair• People in similar circumstances are treated differently• Those in greatest need are often on the lowest payments
Disincentives to work and study• Fear of loss of a higher, more secure payment
Complex• Focus on payment gatekeeping rather than help to find
employment
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The pension fortress
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Australian reform proposals1994
Minister Baldwin: ‘A single payment’
2002
Ministers Vanstone & Abbott: ‘A simpler system’:• A core payment for people of working age• Supplements for costs of disability, sole parenthood, rent, participation, and
children
2010
Henry Report: ‘Australia’s future tax system’:• Reduce gap between pension and allowance payments• Common indexation formula based on wage movements• Income tests to reflect different work expectations (e.g. part time Vs
fulltime)
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Alternative payment structure
Base rates of payment & income tests: Based on minimum costs of living for a single adult/couple
Common basic eligibility conditions:Residence, etc
Rent
Dis-ability
Carer Job search
Train-ing
SoleParent
Activity requirements and services:employment
none → (disability/caring/parenting) → full
Supple-ments,e.g:
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UK: Universal credit
Replace separate income support payments and tax
credits with a single payment and a common income test.
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NZ: ‘Jobseeker support’
Replace existing payments with a common base rate payment, retaining supplements for special needs
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Conclusions
• Reliance on income support is declining• But those still reliant are more disadvantaged• The present social security system is based on a sharp
distinction between ‘able to work’ and ‘not able to work’• This is outdated, unfair and undermines the participation
agenda• There are good ideas around to reform the system• Other countries are pursuing this• It’s time we took up the challenge
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Extra slides
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Reliance on DSP stabilised prior to the GFC
Note: as a % of working-age population
Source: OECD
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Reliance on income support is slightly below OECD average
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Average effective tax rates – from joblessness to low paid fulltime work (OECD, 2007)
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The trade off between encouraging part and fulltime work: Effective marginal tax rates for
allowees and pensioners (2008)
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References ACOSS (2010), Out of the maze, reform of working age social security payments.
ACOSS (2008), Who is missing out? www.acoss.org.au/publications (using data provided by the SPRC)
Australia’s Future Tax System (2009), Report.
FAHCSIA (various years), Income support customers, a statistical overview
DWP (2010), Universal credit, welfare that works, UK Government
OECD Benefits and wages database
OECD Social expenditure database
OECD (2011), Enhancing labour utilization in a socially inclusive society in Australia, OECD Economics Department Working Paper No 852
Saunders, Naidoo & Griffiths (2007), Towards new indicators of Disadvantage: Deprivation
and social exclusion in Australia, Social Policy Research Centre, University of NSW
Welfare working group (2011), Reducing Long-Term Benefit Dependency, New Zealand Government.
http://ips.ac.nz/WelfareWorkingGroup/Index.html